Alberta Oil and Gas Regulations The Key to Wellbore Integrity

1. Alberta Oil and Gas RegulationsThe Key to Wellbore Integrity Presented by Theresa Watson at the Third Wellbore Integrity Network Meeting Santa Fe, New Mexico March 13, 2007

2. Overview • Alberta Oil and Gas Wells • Regulation History • Regulation Protecting Groundwater and Atmosphere • Wellbore Construction • Wellbore Abandonment • Alberta Advantage • Skeletons • What Next?

3. Oil and Gas Wells in Alberta End of 2006 362,265 total 116,550 abandoned Oldest: 1883 Area: 664,332 km2 (256,610 sq.mi)

4. Major Historical Events • 1670 Hudson Bay Company (HBC) granted most land in Western Canada • Building the railway • Federal to provincial ownership of resources

5. Hudson Bay Company 1870 HBC surrenders land to Dominion of Canada and retains 1/20 of Fertile Valley Land Belt (Bounded by USA border, North Saskatchewan River, Rocky Mountains and Lake Winnipeg) Sections 8 and 26 Company eventually formed Hudson Bay Oil and Gas Dome Petroleum Amoco

6. Dominion Land Survey

7. Canadian Railway Canadian Pacific Railway (CPR) and other rail companies were granted odd numbered townships except 11 and 29 in exchange for development of the railroad.

8. CPR Hits Gas 1883 CPR hits gas while drilling for water to supply the steam engines.

9. Individual Landowners • The rail companies and HBC sold off some land to individuals, who obtained the mineral rights with their purchase. • After 1887 mineral rights were not issued with the homestead grants on the remaining 18 sections of a township. • The government retained ownership of the minerals.

10. Major Historical Events • 1922 the Federal Government implements drilling spacing requirements. • October 1, 1930 the Federal Government turns over mineral ownership to the provinces. • 1931 Alberta enacts legislation to control drilling activity • 1932 Turner Valley Conservation Board • 1938 Alberta Petroleum and Natural Gas Conservation Board (precursor to the EUB) • 1950 Alberta Oil and Gas Act

11. What This Means • The government had a vested interest in keeping track of any oil and gas activity, for royalty payment. • HBC and the rail companies also needed good records to make sure they would be adequately compensated. • From the beginning, licenses were issued and records were kept regarding drilling, completion and abandonment of wells.

12. Early Drilling Activity Formation of Alberta P&NG Conservation Board Approximately 850 wells were drilled prior to 1938 in Alberta. Records for these wells were gathered and retained by the regulator after 1938

13. Cumulative Wells Drilled Alberta Oil & Gas Act

14. Extensive Data Repository • Licensing Information • Depth, licensee, location, deviation, classification, etc. • Wellbore Construction • Casing, cementing, perforating, equipment, dates • Geology • Production • Gas analysis, reserves, volumes, water, allowables, etc. • Abandonment • Dates, method, surface casing vent flow and gas migration, pressure test, surface abandonment.

15. Regulations Impacting Wellbore Construction & Abandonment After the Implementation of the Alberta Oil and Gas Act in 1950 Testing Wellbore construction

16. Original Oil and Gas Act • Provisions to notify and obtain approval to drill or abandon a well • Required proper casing and cementing • Conservation of gas, oil and water • Protection of life, property and wild life • Prevention of fire • Prevention of well blow out • Prevention of pollution of fresh water supplies

17. Historical Protection of Groundwater • Oil and Gas Act of 1949 required • Surface casing be cemented full length • Next string of casing to be cemented in compliance • Annulus between casings to be left open • Water encountered while drilling must be reported. • 1967 Surface casing must be set 75 ft below potable water (no definition of potable) • Injection wells must be equipped with a packer.

18. Protection of Atmosphere • Main concern is Hydrogen Sulfide leakage • Wells with over 5% H2S must be equipped with packers • Natural gas leaks to atmosphere were implicated in atmospheric pollution later on. • Regulation regarding venting and flaring has been evolving since 1995

19. 1990’s • Major regulation changes started occurring about this time. • Suspension guidelines (ID 90-04) • Specific abandonment requirements (Guide 20, 1991) • Requirements to test wells for leakage prior to abandonment. (ID 95-01) • Requirements for repair of leaking wells if serious or prior to abandonment. (Guide 20) • Useable groundwater defined as <4000 mg/l TDS • Protection of useable groundwater specifically required during well construction and abandonment. (Guide 20)

20. Wellbore Construction • 1963 minimum surface casing cementing requirements • Last updated 1997 • 1966 minimum production and intermediated casing cementing requirements • Last updated 1990 • 1990 casing design requirements • Update in progress

21. Testing & Reporting Requirements • 1989 Casing failure (ID 89-19) • Updated 2003 • 1989 Packer isolation testing (ID 89-09) • Updated 2003 • 1990 Segregation tests (ID 90-03) • Updated 2006 • 1995 Surface casing vent flow testing • Updated 2003

22. Abandonment • First comprehensive guide issued in 1991 • Current issue 2004 • Specified porosity cutoffs for plug setting in open hole abandonment • Specific requirements for wells penetrating bitumen reserves • Plug setting requirements for cased hole • SCVF/GM testing requirements • Pressure testing requirements • Zonal isolation requirements • Ground water protection requirements • Surface abandonment requirements

23. Alberta Advantage • Alberta has excellent historical records of wellbore location, construction and depths. • Regulation has historically been strong in ensuring wellbore integrity, both for resource management, depletion and public/environmental protection • We know where we’ve been. • We know where the skeletons lie.

24. Skeletons in the Closet • Regulations were developed for the depletion of the resource in a safe and equitable manner. • Technology changes redefine “resource” • Coal bed methane • Tight gas sands • Shales • Hydrates • Changes in reservoir uses • CO2 storage • EOR projects • Acid gas storage • Nuclear waste storage • Testing and reporting requirements • Cased hole abandonment methods • Surface abandonment methods

25. Regulations Impacting Wellbore Construction & Abandonment After the Implementation of the Alberta Oil and Gas Act in 1950

26. Example of SCVF and GM Testing 4: Container with water to observe gas bubbles 5: Gas migration test hole 6: Hand pump to direct the accumulated gas to the LEL meter (LEL: Lower Explosion Limit) 1: Wellhead 2: Surface casing vent (SCV) 3: Hose connected to SCV to direct flow

27. Annual Pressure Build-up Tests for SCVF in a Well which Passed the Bubble Test

28. Time to Detect SCVF/GM

29. Cased Hole Abandonment Methods Typical zonal abandonment: Bridge plug capped with cement. Reservoir fluids can attack metal and elastomers and eventually leak to surface. Most secure method of cased hole abandonment: Cement retainer and squeeze cement to seal sand face, perforations and wellbore.

30. Example of Cement and Casing Quality in a Well in the Haynes Field, Alberta

31. Casing Failure

32. Installation of Surface Abandonment Caps Capping production casing Capping surface casing

33. Surface Abandonment Issues • Undetected wellbore leakage or failure of zonal abandonment can lead to high pressures beneath the well cap. • In conjunction with casing failure gas or fluid may breach the surface casing shoe and/or infiltrate ground water • High contained pressure in wellbores poses a public safety risk in the event of accidental strikes • Practice of placing corrosion inhibitors in the wellbore may place ground water at risk if casing fails.

34. Where Do We Go From Here? • Work is ongoing to amend regulations going forward to address future use of reservoirs and wellbores • Changes in surface abandonment requirements • Discussions regarding zonal abandonment methods and products • Well inhibition after abandonment • Cementing requirements • Industry proactive on many issues • Alberta’s Advantage in information will provide the means to identify and rectify future problems

35. Alberta is looking forward to a bright future, where……. Life is good!!